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The focal plane array in this picture converts infrared energy generated by people and objects into electrical charges that can then be digitized for display as an image. The technology was used mainly by the military for targeting and vision enhancement until the 1990s, but now is finding numerous commercial applications -- which is why companies in countries like China and South Korea have begun producing the arrays. (Image: www.ll.mit.edu)

No organization in history has done more to develop new technology than the U.S. Department of Defense. Among the breakthroughs it was instrumental in advancing were integrated circuits, digital computers, jet engines, lasers and the internet. But in the years after the Cold War ended, the pace of military innovation slowed and commercial companies took the lead. Some of those companies were overseas. Despite the billions of dollars it spends each year on research, the Pentagon has become a bit of a backwater when it comes to new ideas.

However, the rules that the government uses to regulate the overseas sale of technologies with military applications haven't changed much since the Arms Export Control Act became law in 1976. Back then, policymakers were mainly concerned with preventing the Soviet Union from gaining access to superior U.S. technology. There were no smart phones or tablet computers, and nobody could have imagined that almost all such items one day would be manufactured overseas. So when a "Munitions List" of controlled items was compiled, the government erred on the side of caution in determining what could be exported.

The Soviet Union went away, but the mind-set governing technology exports did not. A recent government study traced the disappearance of America's lead in telecommunications satellites to the fact that the U.S. is the only country in the world that treats such systems as defense articles, even though a dozen other countries now build, launch and operate them for purely commercial purposes. The Commerce Department administers a separate list of so-called "dual-use" items with both military and commercial applications that can be exported more freely than the technologies on the Munitions List, but when there's a disagreement over the sensitivity of an item, the State Department -- which administers the Munitions List -- is the final arbiter.

Obviously, this regulatory regime has a dampening effect on U.S. technology exports. Each violation of the rules can result in a million-dollar fine and up to 20 years in prison, and as a State Department Q&A prepared for prospective exporters helpfully points out, "a single case may involve more than 100 alleged violations." Companies that run afoul of the regulations can also be barred from receiving export licenses or doing business with the federal government. So like the bureaucrats who wrote the regulations, the companies tend to err on the side of caution. That's especially true of foreign customers for U.S. technology, who must keep tabs on where any items on the U.S. Munitions List that they buy ultimately end up.

Which brings me to the subject of focal plane arrays -- uncooled ones, to be precise. FPA's are sensor/processor components as small as a nickel that detect the infrared energy emitted by objects and convert it into electrical charges suitable for forming an image. Their best-known military uses are in thermal weapons sights and systems for enhancing driver vision, particularly at night. Infrared energy is a form of light, but its frequency is lower than that of visible light, so humans can't see it without the aid of FPA's. A few animals, such as vampire bats, apparently can.

Uncooled focal plane arrays were used mainly by the military until the information revolution came along, and the United States has traditionally been a global leader in the technology. But since there was little doubt infrared vision enhancement would be helpful to America's enemies, FPA's have been treated as subject to the strictures of the Munitions List -- even though technically they were not on the list. Now, in a perverse twist of the export reform process, there is a danger they will formally be made subject to the International Trade in Arms Regulations, or ITAR, that govern all items on the Munitions List -- just as the overseas commercial market for the technology is beginning to explode.

I should mention that in researching this arcane topic, I discovered that several companies involved in the production of uncooled focal plane arrays contribute to my think tank. But this is a story that transcends their narrow interests, because it illustrates how, with the best of intentions, overly zealous bureaucrats can destroy the technological foundations of U.S. prosperity and security. As with other digital technologies, leadership in the focal plane array market is shifting to commercial suppliers and customers as companies find new uses for them and prices come down. For example, BMW uses the technology to help drivers see pedestrians at night beyond the range of their headlights.

Tools for detecting and measuring heat flows using FPA's can now be bought in U.S. stores, and they are increasingly used in security cameras. The global commercial market is expected to increase tenfold through the end of the decade. But that market will be dominated by producers that have begun to emerge in China, France and South Korea if the FPA's made by American companies end up on the Munitions List. When that happens, America will lose its lead in a technology where it was once the dominant player, with predictable consequences for U.S. jobs and the trade balance.

But the damage doesn't end there. Since commercial sales of uncooled FPA's surpassed military sales in 2010 and are growing fast, only the companies that are in the commercial market will have the economies of scale to remain price-competitive over the long run. With greater revenues and returns, they will become the market leaders in both sales volume and technological sophistication. Which means that rather than protecting sensitive military technology, U.S. export rules could end up making America's military dependent on offshore sources for a vital tool in modern combat.

There seems to be a simple solution to this problem. Rather than treating uncooled FPA's like some exotic technology that no one else has, follow the lead of all the other countries now making them and regulate their export as dual-use items. In other words, put the technology on the Commerce Department's export control list so that it can be monitored without strangling the ability of U.S. companies to compete. Exporters would still have to obtain licenses and comply with regulations, but they would be on a level playing field with foreign competitors.

The Commerce Department has a reasonably rigorous mechanism for assuring that exporters comply with rules for how and where dual-use items can be sold. But it doesn't impose the burden of being placed on the Munitions List, which would be the kiss of death in an emerging commercial market with numerous overseas players. This is the kind of accommodation that policymakers have to make if America is ever going to close its yawning trade deficit in advanced technology. Uncooled focal plane arrays may be an obscure topic for most people, but their treatment in the U.S. regulatory regime for exports is emblematic of a much bigger challenge.